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Opportunities in Location Technologies: an Overview

For those of you who are sci-fi buffs, the imagination of the late, great, Philip K. Dick provided the plots for several movies, two of which are notable for their prediction of what the world may look like in the future. While the original “Blade Runner” shows Los Angeles engulfed in a twilight of endless smog, and gets it horribly wrong with a dot-matrix printer, this movie was made almost 40 years ago. The ubiquitous advertising and the promise of a better life off-planet are not that far off the mark for 2019, the year the movie is set in. Made more recently, and with a team of futurist advisors, “Minority Report” has some uncannily accurate predictions, especially targeted advertising that broadcasts to hero John Anderton as he passes, based on his retinal scan. Other features, such as driverless cars and gesture-driven displays are within our reach. What is most unnerving about the technology in “Minority Report” is that the movie is set in 2054, not 2017 or a few years from now. This illustrates how disruptive mobile technology has been to our world.

Targeted, location-based marketing is not something from the future, it is already here.

However, it is not activated by our biometrics, but by our smartphones or wearables. While we are the intended receiver of these messages, the devices talk among themselves. It is our phone, either operating in native mode or powered by a mobile app, that communicates what the retailer, airport or event manager wants us to know. The message was pushed to our phone by another device, in what is called M2M (machine-to-machine) communication. This trend in e-commerce development is affecting every sector of industry, especially where large volumes of consumers are found, such as airports, sports events and malls.

The Universe of Location-based Marketing

There are several components that support this location-based or proximity technology. Some are communication protocols, emanating from devices and sensors (the Internet of Things – IOT), backed by data stored in various types of databases which has been subjected to complex analytics. The major disruption of the smartphone has both enabled and driven location-based engagement. It is predicted that:

  • 70% of retailers will install beacons for location-based marketing by 2021
  • In order to support all aspects of retail, from customer journey through to inventory management, 75% of retailers expect to invest heavily in business intelligence by 2021, in all areas of the business
  • 84% of airports will implement this technology by 2019
  • 400 million beacons will be installed globally by 2020

Any business that has a brick-and-mortar footprint and a customer journey component will need to adopt proximity technology if it wants to survive and thrive. This is an overview of what you need to embark on the voyage of proximity marketing.

How the Message is Transmitted: Proximity Communication Protocols

Wi-Fi – We are all familiar with in-store Wi-Fi, it’s even a good reason for loitering in our favourite coffee shop, as we take advantage of the free Wi-Fi. However, in-store Wi-Fi also allows the retailer to send us text messages with special offers to that device we are using.

BLE – this is the acronym for Bluetooth Low Energy. Up to now, Bluetooth has only been suitable for indoor communication, and has a limited range measured in feet or metres. However, at the end of 2016, Bluetooth 5 was announced, with claims that it quadruples the range, doubles the speed, and boosts broadcast messaging capacity by 800%. This would make it viable for outdoor use as well. Bluetooth powers beacons, enabling the beacon to communicate with the customer via an app once they are within BLE range (discussed below).

NFC – Near Field Communications is used for very close proximity communications (inches or centimeters). While it can be used for transferring files, its most common application is for card-less payments, where the point-of-sale (POS) terminal has been NFC-enabled.

GPS – Geographic Positioning System. Many of us are now familiar with GPS because we use a GPS device to find our way instead of a map. GPS is also used in location-based marketing for geofencing (discussed below).

How the Business knows we are Here or Near

There are a variety of devices that can sense our phones and transmit messages to them.

Beacons – Beacons are the predominant choice for interacting with customers’ smartphones – they are inexpensive and simple to install. Apple started the conversation with the iBeacon, but there are competitors now that cater for Android, like Eddystone, and others that are platform-agnostic. They predominantly use BLE for communicating in-store.

Geofencing – Based on GPS technology, a geofence is a “virtual fence” that can be erected around a store, for instance, that opens communication with a customer when they are in the vicinity, inviting them to purchase, or offering coupons.

RFID – Radio-Frequency Identification. Small, very low-cost devices that can be used instead of bar-coding. The advantage is that RFIDs can be read from a distance, unlike barcodes. The challenges are the lack of industry standards and possible conflicts between readers and tags: when the reader tries to read 2 tags at once, or there are too many tags too close together. The ideal use for RFID is at checkout, when a complete shopping cart can be read at one go, instead of items being scanned individually.

Sensors – The Internet of Things consists of sensors, sensors and even more sensors. We are already surrounded by sensors in our homes and cars, but they will increasingly be deployed for all sorts of tasks, from reading the heat emitted by a building to notifying that a stock has fallen below the reorder level.

There are other devices that can be used too. Some other technology that will also start paying an increasing role in location-based marketing:-

Facial Recognition Cameras – These cameras were originally developed for the diamond merchants in New York. They can be programmed to recognise objects or even faces. This information can be used as a security feature, but is increasingly being used for video analytics of customer sentiment.

Smart Lighting –  Philips has designed a lighting system that can assist the shopper on a route through your store, for instance, to collect the different ingredients for a recipe. The only disadvantage with this technology is that it is based on line-of-sight, so if the customer is standing in the wrong place, they will block the signal.

What to do with the Data: Big Data databases and Analytics

All these devices conversing with shoppers and each other, create large volumes of data. It is not the size of the data that is an issue though, it is the variety, ranging from text messages to videos. The storage, retrieval and analysis of the data is a topic on its own. The data management space is evolving too; before you needed to acquire an unstructured, big data database and employ highly skilled and very scarce data scientists to manipulate the data. This is changing to an environment that an unstructured (or NOSQL – not only SQL) big database and traditional relational databases are combined and new data analytics tools are making it simpler to find the right data.

Introducing Proximity Marketing into your own Environment

You may be considering either a permanent solution for your store or stores, or perhaps you want to run a short, location-enabled campaign, like a conference or a Black Friday sale. There are experts who can help you along the journey, from strategy and design, through to implementation and analysis. Startling ROI has been achieved in most cases by those who have taken the plunge. There are a few prerequisites to achieving the best results:-

  • understand your customer and what drives him or her
  • have an omni-channel architecture, so that the customer can receive your messages via their channel of choice
  • ensure that your inventory system is robust and not prone to stock-outs; this is a major beef with customers, generally.

Some results can be spectacular, The NBA team Orlando Magic increased ticket sales by $1 million with a combination of beacons, Wi-Fi and NFC technologies in 2015, you could enjoy a similar experience.

Ekaterina Prohorchik

  • Jon Andrews

    It’s funny how the three prerequisites you listed at the end of this article can apply to so many scenarios (especially in marketing), and that the writer chose to list “understand your customer and what drives him or her” as number one. I definitely agree, these three factors need to be taken into consideration for any proximity marketing campaign. I find the use of sensors to be interesting and practical. I went to a bar once and the manager and I had a long talk over a few rounds. He told me the bar has sensors in the beer delivery system that alert owners when to reorder stock. I’m sure Philip K. Dick didn’t imagine such wonders!